Toronto Island is a must see and it is basically free, an oasis in the middle of the city. The island is a like a large peaceful park with beaches (there's a nude beach, gay beach as well as regular beaches), rollerblading, biking and walking paths, and even an amusement park and free petting zoo for children.
Ferries leave every 15 minutes from Bay St and Queens Quay at Harbourfront, just south of Union Station. There's plenty of parking too. www.toronto.ca/parks/island/index.htm
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The islands are quiet and calm (well they were when I was there), compared to the bustle of downtown Toronto. It might have been the area we walked arund, but the only food available on the island were pizzas etc - worth taking something over with you if you intend to have a picnic.
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There's a nice photo on Wikipedia:
en.wikipedia.org/wiki/Image:Toronto-islands.jpg
Try not to go when it's -25 in Winter. You'll get a little bit cold waiting for the ferry back!